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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported):

March 1, 2004

 

 

 

CONTINENTAL AIRLINES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

1-10323

74-2099724

(State or other jurisdiction

(Commission File Number)

(IRS Employer

of incorporation)

  

Identification No.)

 

1600 Smith Street, Dept. HQSEO, Houston, Texas

77002

(Address of principal executive offices)

(Zip Code)

(713) 324-2950

(Registrant's telephone number, including area code)

Item 5. Other Events.

On March 1, 2004, we issued a press release announcing our February performance and our estimated consolidated breakeven load factor for March. The press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9. Regulation FD Disclosure

On March 1, 2004, we provided an update for investors presenting information relating to our operational performance for February 2004. The update is furnished herewith as Exhibit 99.2 and is incorporated herein by reference.

Item 7. Financial Statements and Exhibits.

    1. Exhibits

      1. Press Release

      2. Investor Update

 

 

 

SIGNATURE

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, Continental Airlines, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

CONTINENTAL AIRLINES, INC.

 

 

March 1, 2004

By /s/ Jennifer L. Vogel      
 

Jennifer L. Vogel
 

Senior Vice President, General Counsel
and Secretary

 

 

EXHIBIT INDEX

99.1

Press Release

99.2

Investor Update

 

 
News Release

EXHIBIT 99.1

News Release

Contact: Corporate Communications

Houston: 713.324.5080

Email: corpcomm@coair.com

News archive: continental.com/news/ Address: P.O. Box 4607, Houston, TX 77210-4607

CONTINENTAL AIRLINES REPORTS

OPERATIONAL PERFORMANCE FOR FEBRUARY 2004

HOUSTON, March 1, 2004 - Continental Airlines (NYSE: CAL) today reported a February systemwide mainline load factor of 70.2 percent, 1.3 points above last year's February load factor. The airline had a February domestic mainline load factor of 70.6 percent, 0.4 points below February 2003, and an international mainline load factor of 69.5 percent, 3.7 points above February 2003.

During the month, Continental recorded a U.S. Department of Transportation on-time arrival rate of 79.9 percent and a systemwide mainline completion factor of 99.7 percent.

In February 2004, Continental flew 4.5 billion mainline revenue passenger miles

(RPMs) and 6.4 billion mainline available seat miles (ASMs) systemwide, resulting in a traffic increase of 13.9 percent and a capacity increase of 11.7 percent as compared to

February 2003. Domestic mainline traffic was 2.7 billion RPMs in February 2004, up 11.4 percent from February 2003, and domestic mainline capacity was 3.8 billion ASMs, up 12.0 percent from February 2003. Without the extra Leap Year day in February, these traffic and capacity increases would have been about three points lower.

For January 2004, systemwide mainline RASM increased 0.9 percent as compared to January 2003. Systemwide February 2004 mainline passenger revenue per available seat mile (RASM) is estimated to have decreased between 2.5 and 3.5 percent compared to February 2003. The February year-over-year RASM decline was partly attributable to Continental's strong performance relative to the industry during February last year, and the poor performance this year of the very competitive transcontinental markets, where RASM declined an estimated 25 to 30 percent as compared to February of last year. Further, in February 2004, transcontinental markets accounted for 12.3 percent of domestic capacity compared to 9.8 percent in February 2003.

Continental's regional operations (Continental Express) set a record February load factor of 63.1 percent, 0.9 points above last year's February load factor. Regional

RPMs were 486.6 million and regional ASMs were 770.7 million in February 2004, resulting in a traffic increase of 47.0 percent and a capacity increase of 44.8 percent versus February 2003.

This press release contains forward-looking statements that are not limited to historical facts, but reflect the company's current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the company's 2003 10-K and its other securities filings, which identify important matters such as terrorist attacks, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition, regulatory matters and industry conditions, including the demand for air travel, the airline pricing environment and industry capacity decisions. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release.

-more-

 

 

PRELIMINARY TRAFFIC RESULTS

FEBRUARY

  

2004   

2003   

Change   

REVENUE PASSENGER MILES (000)

    
 

Domestic

2,708,034

2,431,388

11.4  Percent
         
 

International

1,803,801

1,531,411

17.8  Percent
 

Transatlantic

700,766

605,759

15.7  Percent 
 

Latin America

674,961

589,167

14.6  Percent 
 

Pacific

428,074

336,485

27.2  Percent 
         
 

Mainline

4,511,835

3,962,799

13.9  Percent
         
 

Regional

486,642

331,052

47.0  Percent
         

AVAILABLE SEAT MILES (000)

    
 

Domestic

3,836,231

3,426,039

12.0  Percent
         
 

International

2,594,230

2,328,444

11.4  Percent
 

Transatlantic

1,045,931

945,114

10.7  Percent 
 

Latin America

956,958

833,441

14.8  Percent 
 

Pacific

591,341

549,889

7.5  Percent 
         
 

Mainline

6,430,461

5,754,483

11.7  Percent
         
 

Regional

770,730

532,224

44.8  Percent
         

PASSENGER LOAD FACTOR

    
 

Domestic

70.6 Percent

71.0 Percent

(0.4) Points
         
 

International

69.5 Percent

65.8 Percent

3.7  Points
 

Transatlantic

67.0 Percent 

64.1 Percent 

2.9  Points 
 

Latin America

70.5 Percent 

70.7 Percent 

(0.2) Points 
 

Pacific

72.4 Percent 

61.2 Percent 

11.2  Points 
         
 

Mainline

70.2 Percent

68.9 Percent

1.3  Points
         
 

Regional

63.1 Percent

62.2 Percent

0.9  Points
         

CARGO REVENUE TON MILES (000)

    
 

Total

82,376

77,161

6.8  Percent

 

(more)

 

YEAR-TO-DATE

  

2004   

2003   

Change   

REVENUE PASSENGER MILES (000)

    
 

Domestic

5,435,823

5,028,564

8.1  Percent
         
 

International

3,839,093

3,327,947

15.4  Percent
 

Transatlantic

1,503,334

1,307,685

15.0  Percent 
 

Latin America

1,419,076

1,280,424

10.8  Percent 
 

Pacific

916,683

739,838

23.9  Percent 
         
 

Mainline

9,274,916

8,356,511

11.0  Percent
         
 

Regional

956,664

658,828

45.2  Percent
         

AVAILABLE SEAT MILES (000)

    
 

Domestic

7,758,560

7,259,474

6.9  Percent
         
 

International

5,341,366

4,953,964

7.8  Percent
 

Transatlantic

2,156,899

2,002,416

7.7  Percent 
 

Latin America

1,958,804

1,784,590

9.8  Percent 
 

Pacific

1,225,663

1,166,958

5.0  Percent 
         
 

Mainline

13,099,926

12,213,438

7.3  Percent
         
 

Regional

1,537,621

1,113,425

38.1  Percent
         

PASSENGER LOAD FACTOR

    
 

Domestic

70.1 Percent

69.3 Percent

0.8  Points
         
 

International

71.9 Percent

67.2 Percent

4.7  Points
 

Transatlantic

69.7 Percent 

65.3 Percent 

4.4  Points 
 

Latin America

72.4 Percent 

71.7 Percent 

0.7  Points 
 

Pacific

74.8 Percent 

63.4 Percent 

11.4  Points 
         
 

Mainline

70.8 Percent

68.4 Percent

2.4  Points
         
 

Regional

62.2 Percent

59.2 Percent

3.0  Points
         

CARGO REVENUE TON MILES (000)

    
 

Total

157,862

147,247

7.2  Percent

 

(more)

 

PRELIMINARY OPERATIONAL AND FINANCIAL RESULTS

FEBRUARY

  

2004 

2003 

Change  

On-Time Performance1

79.9%

77.8%

2.1  Points

Completion Factor2

99.7%

97.1%

2.6  Points
         

YEAR-TO-DATE

  

2004 

2003 

Change  

On-Time Performance1

79.9%

81.7%

(1.8) Points

Completion Factor2

99.5%

98.5%

1.0  Points
         

January 2004 consolidated breakeven load factor3

81.0  Percent

February 2004 estimated year-over-year RASM change

(2.5)-(3.5) Percent

February 2004 estimated average price per gallon of fuel,

                       excluding fuel taxes

102.0 Cents   

February 2004 estimated consolidated breakeven load factor3,4

84 Percent

February 2004 actual consolidated load factor6

69.4  Percent

March 2004 estimated consolidated breakeven load factor3,5

79 Percent
 

YEAR-OVER-YEAR SYSTEM RASM7

2002 vs. 2001

2002 vs. 2000

  

May

(6.3) Percent

(15.1) Percent

  

June

(5.5) Percent

(15.5) Percent

  

July

(4.0) Percent

(13.5) Percent

  

August

(2.7) Percent

(15.2) Percent

  

September

10.8  Percent

(17.6) Percent

  

October

9.3  Percent

(15.7) Percent

  

November

(1.7) Percent

(18.4) Percent

  

December

10.1 Percent

(5.7) Percent

  
 

2003 vs. 2002

2003 vs. 2001

  

January

3.5 Percent

(11.0) Percent

  

February

(0.4) Percent

(11.3) Percent

  

March

(11.7) Percent

(17.4) Percent

  

April

(1.0) Percent

(11.3) Percent

  

May

2.0 Percent

(4.3) Percent

  

June

0.3 Percent

(5.2) Percent

  

July

4.9 Percent

0.7  Percent

  

August

4.4 Percent

1.5 Percent

  

September

5.3 Percent

16.7 Percent

  

October

4.4 Percent

14.1 Percent

  

November

5.5 Percent

3.7 Percent

  

December

1.7 Percent

12.0 Percent

  
 

2004 vs. 2003

2004 vs. 2002

  

January

0.9 Percent

4.5 Percent

  

February (estimated)

(2.5)-(3.5) Percent

(3.0)-(4.0) Percent

  

1 Department of Transportation Arrivals within 14 minutes

2 System Mileage Completion Percentage

3 Consolidated load factor (including Continental Airlines and Continental Express) needed to break even on a consolidated net income

basis. Actual consolidated breakeven load factor may vary significantly from estimates depending on actual passenger revenue yields,

fuel price and other factors. Month-to-date consolidated load factor information can be found on Continental's website at

continental.com in the Investor Relations-Financial/Traffic Releases section.

4 Charges related to a non-cash charge for the termination of a royalty agreement and an MD-80 aircraft retirement account for 5

percentage points.

5 Charge related to MD-80 aircraft retirements account for 1 percentage point.

6 Includes Continental Airlines and Continental Express

7 CAL has been releasing RASM data since May 2001

###
 

EXHIBIT 99.2


Sarah Zaozirny
Director - Investor Relations

Investor Update

Issue Date:

March 1, 2004

This report contains forward-looking statements that are not limited to historical facts, but reflect our current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in our 2003 10-K and our other securities filings, which identify important matters such as terrorist attacks, domestic and international economic conditions, the significant cost of aircraft fuel, labor costs, competition and industry conditions including the demand for air travel, airline pricing environment and industry capacity decisions, regulatory matters and the seasonal nature of the airline business. In addition to the foregoing risks, there can be no assurance that the company will be able to achieve the pre-tax benefits from the revenue-ge nerating and cost-reducing initiatives discussed previously, some of which will depend, among other matters, on customer acceptance and competitor actions. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

Current News

    

Today Continental reported its operational performance for February 2004. February systemwide mainline load factor was 70.2%, 1.3 points above last year's February load factor on a 13.9% increase in traffic and an 11.7% increase in capacity. Without the extra Leap Year day in February, these traffic and capacity increases would have been about three points lower. Systemwide February 2004 mainline RASM is estimated to have decreased between 2.5% and 3.5% compared to February 2003. The February year-over-year RASM decline was partly attributable to Continental's strong performance relative to the industry during February last year, and the poor performance this year of the very competitive transcontinental markets, where RASM declined an estimated 25 to 30 percent as compared to February of last year. Further, in February 2004, transcontinental markets accounted for 12.3% of domestic capacity compared to 9.8% in February 2003.

We anticipate that 1Q04 Cost per Available Seat Mile (CASM) will be down 3.7% to 4.2% compared to 1Q03, and that 1Q04 CASM ex-fuel, excluding special items will be down 3.8% to 4.4% compared to 1Q03.

Continental will record a special operating charge of approximately $17 million ($11 million after taxes) related to the permanent grounding of three MD-80 aircraft during the first quarter. The charge is associated with future obligations for rent and return conditions net of assumed sublease income. Additionally, Continental recorded a non-cash special charge of $34 million ($22 million after taxes) related to the termination of a royalty agreement during the first quarter.

 

 

Tax Sharing Agreement with ExpressJet Holding, Inc.
Continental expects to receive approximately $40 million in 2004 and $20 million in 2005 related to a tax-sharing agreement with ExpressJet Holdings, Inc. For more information regarding this tax-sharing agreement, please see our 2003 10-K.

Targeted Cash Balance

Continental anticipates ending the first quarter of 2004 with a cash and short-term investments balance of approximately $1.5 billion, including approximately $185 million of restricted cash.

Advanced Bookings - Six Week Outlook

Domestic bookings through mid-April are running about even with last year on about 1% more seats. Despite the slight booking weakness, we expect load factors will continue to be strong, and will most likely be 2-3 pts higher than last year in March and April. The negative pressure on domestic yields was greater than originally anticipated for February and we currently expect first quarter domestic yields to be down several points.

All our international regions remain booked ahead, or are expected to finish ahead, of last year for most weeks. We expect first quarter load factors to be up 1-2 pts in Latin and up 8-10 pts in Transatlantic and Pacific regions over the same period last year.
 

2004 Estimated
Year-over-Year %Change

ASMs

1st Qtr.(E)

Full Year(E)

  

Domestic
Latin America
Transatlantic
Pacific
Total Mainline System

Regional

6.0%
8.5%
3.5%
5.5%
6.0%

35.5%

2.5%
12.0%
17.5%
8.5%
6.5%

24.0%

  

 
 

2004 Estimate

Load Factor

1st Qtr.(E)

Full Year(E)

Continental
Regional

73 - 74%
64 - 65%

76 - 77%
71 - 72%

 

 
 

2004 Estimate (cents)

Mainline Operating Statistics

1st Qtr.(E)

Full Year(E)

CASM (including special items)
Special items per ASM (a)
CASM Ex-Fuel (including special items)(b)

9.82 - 9.87
0.25
8.21 - 8.26

9.41 - 9.46
0.06
7.90 -7.95

 
 

2004 Estimate (cents)

Consolidated Operating Statistics

1st Qtr.(E)

Full Year(E)

CASM (including special items)
Special items per ASM (a)
CASM Ex-Fuel (including special items) (b)

10.67 - 10.72
0.23
8.95 - 9.00

10.24 - 10.29
0.05
8.63 - 8.68

 
 

2004 Estimate

Fuel Gallons Consumed

1st Qtr.(E)

Full Year(E)

Mainline
Regional

Fuel Price per Gallon (excluding fuel taxes)

320 Million
  60 Million

$1.01 - $1.03

1,320 Million
   265 Million

$0.93 - $0.97


Fuel Hedges

% of Volume Hedged

Wtd. Average
Strike Price of Caps

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Full Year Average

0%
0%
20%
20%

10%

n/a
n/a
$32.00/Barrel
$32.00/Barrel

$32.00/Barrel
 

2004 Estimated Amounts ($Millions)

Selected Expense Amounts

1st Qtr.(E)

Full Year(E)

Aircraft Rent
Landing Fees & Other Rentals
Depreciation & Amortization
Net Interest Expense

$220
$155
$105
$88

$905
$635
$420
$355

 


Cash Capital Expenditures

2004 Estimate
($Millions)

Fleet & Fleet Related
Non-Fleet
Rotable Parts & Capitalized Interest
   Total
Net Purchase Deposits
Total Cash Capital Expenditures

$90 
125 
      55 
$270 
   (115)
$155 

  

 

 

EPS Estimated Share Count
Share count estimates for calculating basic and diluted earnings per share at different income levels are as follows:

First Quarter 2004 (Millions)

Quarterly

Number of Shares

  

Earnings Level

Basic

Diluted

Interest Addback

Over $36
Between $19 - $36
Between $0 - $19
Net Loss

65.9
65.9
65.9
65.9

75.5
71.4
66.4
65.9

$3.6
$1.4
- --
- --

Full Year 2004 (Millions)

Year-to-date

Number of Shares

  

Earnings Level

Basic

Diluted

Interest Addback

Over $143
Between $76 - $143
Between $0 - $76
Net Loss

66.1
66.1
66.1
66.1

76.1
71.9
66.9
66.1

$14.2
$5.7
- --
- --

These share count charts are based upon several assumptions including market stock price and number of shares outstanding. The number of shares used in the actual EPS calculation will likely be different from those set forth above.

 

  1. Special items include $51 million of charges during the first quarter of 2003.
  2. Cost per available seat mile excluding fuel is computed by subtracting fuel cost from total operating costs and dividing by available seat miles. This statistic provides management and investors the ability to measure and monitor Continental's cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors and therefore are beyond our control.



Reconciliation of GAAP to Non-GAAP Financial Information

 

1st Qtr 2003

(in millions except per share data)

Net Income (Loss)

Mainline Operating Expenses - GAAP
Items Excluded:
  MD80 Fleet impairment loss
  Fuel Expenses
Mainline Operating Expenses - Non-GAAP

ASMs

CASM - GAAP (cents)
CASM Ex-Fuel Excluding Special Items -   Non-GAAP (cents)

$1,955 

(65)
(301)
$1,589

19,076

10.25

8.33

  



Mainline

1Q03
(cents)

1Q04 Range
(cents)

Year-over-Year
% Change

CASM - GAAP
CASM Ex-Fuel Excluding Special   Items - Non-GAAP

10.25

8.33

9.82 - 9.87

7.96 - 8.01

(4.2) - (3.7)%

(4.4) - (3.8)%